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1 FINANCE MCQS

If the current market price of a common stock is $15 and the conversion rate is 320, the conversion value of the stock is ____________?

  • 3800
  • 2800
  • 4800
  • 5800
Correct Answer: C. 4800

Detailed Explanation

The conversion value of a bond or preferred stock is calculated using the formula:


Conversion Value=Current Stock Price×Conversion Rate\text{Conversion Value} = \text{Current Stock Price} \times \text{Conversion Rate}Conversion Value=Current Stock Price×Conversion Rate


Here:


15×320=480015 \times 320 = 480015×320=4800


This means the conversion value is $4,800, which represents the value of the common stock received upon conversion.

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